Mr. Plender’s blend of ersatz economic technobabble and kitsch will find its advocates/enthusiasts here at The Financial Times. Yet his chatter can lead to only one conclusion for the Free Marketeer.

At the same time the build-up of debt means that borrowers are hostage to potential interest rate spikes as policy normalises. The risk is that central bankers will find themselves torn between the politically unpopular and financially destabilising rate rises that might be required to curb inflation and the more quiescent approach that would be needed if they are to preserve what independence they have. The second outcome would, in effect, usher in an unbrave new world of perpetual quantitative easing.

Consider that the Democracies of the West and their Central Banks have, and will, rescue Capital from its predations, as the-in-order-too of maintaining political/economic stability. Jeremy Green offers, in his 2013 post at Naked Capitalism, and other publications, a primer on Quantitative Easing, as the primary tool for rescuing Capital from its own greed. Not to speak of the fact that Neo-Liberalism relies on the interventions of Central Banks and governments: Free Market? Quantitative Easing equals TINA, in sum the economics and politics of The West are Corporatist!

The way the Fed led the policy response to the financial crisis is important in two ways. First, it reflects the extent to which the Anglo-American economies have become financialised: credit-debt relations are pervasive throughout all facets of contemporary economic activity and there has been a deepening, extension and deregulation of financial markets commensurate with this development. In that context, with the increased competitiveness, scale and global integration of financial markets intensifying the risk of financial instability, the crisis management capacities of central banks have become increasingly important.

Second, central bank leadership of the policy response also reflects a key feature of neoliberal political economy in practice. Despite all the rhetoric of free markets, competition and deregulation that has been the mainstay of neoliberalism, there is a central contradiction at its heart: neoliberalism has been extremely reliant upon the active interventions of central banks within supposedly “free” markets.

The crisis has been warehoused on the expanding balance sheets of central banks, demonstrating just how much scope for policy manoeuvre there is when governing elites want it. Government debt and private assets, including toxic mortgage-backed securities, have been indefinitely transferred onto central bank accounts. This strategy highlights the role of arbitrary accounting processes, shaped by state institutions, at the heart of supposedly “free market” economies.

Given this room for manoeuvre, there is no doubt that a much more expansionary fiscal policy and a progressive taxation system could have been implemented in response to the crisis, but that response is foreclosed by the ideological confines of the prevailing neoliberal orthodoxy. Instead, we have monetary expansion and fiscal austerity.

Incubated within the crisis conditions of the 1970s, the neoliberal revolution in the West was birthed during the 1980s with the landmark electoral victories of Margaret Thatcher and Ronald Reagan. The early years of their tenure were marked by proactive central bank policies, fighting inflation through high interest rate regimes that were justified with monetarist dogma. Those policies had mixed results, but, crucially, they signified the strong emphasis upon monetary policy within the new paradigm, which now prioritised price stability, rather than the traditional post-war commitment to full employment.

Article by Jeremy Green, Research Fellow, Sheffield Political Economy Research Institute (SPERI) at University of Sheffield